Thursday, May 26, 2016

A former trustee for two charitable trusts was
sentenced Monday to 13-plus years in jail for spending $52 million of one of
the organizations’ funds on aircraft, boats, and personal expenses over six
months in the mid-2000s, according to the The Boston Globe.

He used May Smith Trust money for a spending spree
that included purchases of private jets, military planes and helicopters, a
patrol boat, a yacht, and a $700,000 home.

He was convicted in February on 11 felony
counts in what federal prosecutors said was one of the largest cases of
financial fraud in Alaska history.

The Annual Fraud Indicator 2016estimates that the cost of fraud affecting
the voluntary sector was £1.86bn ($2.7bn) in 2013/14, or 2.5 per cent of the
sector’s annual income and expenditure in the U.K.. Similarly, in the U.S., it
is at least three times that percentage.

Friday, May 20, 2016

To
his credit, Senator Chuck Grassley has brought to the public’s attention many
abuses in the charitable sector.

But change, in the past, has not been readily
forthcoming (ie, American Red Cross, Smithsonian)

Now,
Grassley and the Senate Judiciary
Committee have been looking into the spending at the Wounded Warrior Project,
specifically trying to make sense of the proportion of spending on veterans
programs against the total budget.

WWP’s claims that it
spends 80 percent of its expenses on veterans’ services. Charity watchdog
groups, which have estimated the percentage as low as
43 percent excluding fundraising related
costs.

The committee questioned even the services themselves: “It appears the
vast majority of the 94 percent of program services provided to veterans
consisted of tickets to sporting events,” Grassley said in the letter. Grassley
further questioned the characterization of placing $37 million over 2013 and
2014 into a trust fund as a program expense.

The senator finally ventured that, “Of the $242 million WWP spent on
program expenses in FY 2014, it appears that approximately $150 million of it
was not actually spent on veterans by WWP and a large portion of it was in-kind
donations.”

The Grassley letter
concluded with a set of further questions to be completed by June 1st,
including a request for the independent review of spending practices
commissioned by the board and copies of the fundraising materials against which
the joint cost allocations were made.

Lets hope that the WWP response fully addresses the
questions and that the committee concerns don’t get lost in the daily Finance
Committee charge.

Congressman Walter B. Jones (NC-3)
sent a letter to Veterans Affairs Secretary Robert McDonald asking for the
resignation of J. Thomas Burch, the Deputy Director in the Office of the
General Counsel at the VA, who runs an allegedly fraudulent charity called
the National Vietnam Veterans Foundation (NVVF).

Congressman Jones is “outraged
that Mr. Burch receives a taxpayer-funded salary from the VA and drives a Rolls
Royce to work while cheating veterans out of their money and the services he
promises them.

In 2014 he drew a salary of $65,000 as
head of his "zero-star" charity while pulling down $127,000 in salary
in 2014 VA Deputy Director.

According to Charity Navigator,
they don't have an independent board of directors, they actually don't even
have a comprehensive board of directors -- only three members on the board at
this point in time and some of them are family. (CNN)

Wednesday, May 18, 2016

exposing the crisis in nonprofit
fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse,
mismanagement, and malfeasance throughout the charitable sector which
costs taxpayers and contributors tens of billions of dollars annually;
and,

seeking reforms that will restore
the public’s lost confidence in the sector.

What’s Included:

Skunk of the Month:

Hershey Trust; Catholic
Diocese; National Veterans Services Fund…more

Breaking
the Silence:

Triangle Area Network

Charity Check Up:

Hindu Temple

A Thought or Two:

ONE
PRINCIPLE

Nonprofit News-In Case You Missed It:

Cleveland Browns Receiver;
Senate Finance Cmte…more…more

Political/Official Chicanery:

PA; MA; MI; WA; NC; CA; TX; VT; NM; FL;
NJ …more

What Do You
Think?

·To do good, donors must do their homework

·Give without being taken

Despite what the
Independent Sector has said for decades:…”(the charitable sector) doesn’t have
one center of organization and imagination looking out at the far horizon to
inspire and guide all of the component parts to get to a place together that
none operating independently could ever get to on its own. It doesn’t have one
voice to tell the rest of the world where it is headed and what it requires to
get there. It has no coordinated analytical capability to help it understand
its progress.” (Harvard Business Review)

--------------------------------

"Board members of the New York’s nonprofits must
take more responsibility and become better stewards of their organizations,
says a new report released, the second self-examination of the sector to come
out in the past month, a recently released report from
the Human Services Council said.”

oFraud is on the rise at nonprofit organizations, and it’s increasing
frequency and cost;

oNonprofit organizations account for 11% of all occupational fraud
recorded (nonprofits represent only 5.4% of GNP)

oNonprofit organizations suffered the largest median losses in the study

oMost fraudsters (90%) have never been punished or terminated by an
employer for fraud-related conduct

Skunk of the Month…

“They came to
do good and they did very well indeed (for themselves).”

Skunk of the Month is the twice-monthly designation
made by Nonprofit Imperative, the
organization dedicated to eliminating waste, fraud, abuse and mismanagement in
nonprofits and government. The Skunk of the Month award is given to
charities and government officials who show blatant disregard for the interests
and trust of contributors and taxpayers. This month’s example is:

Hershey
Trust Still In Trouble

The chaos at the top
of the $12 billion Hershey charity continues.Insider John Estey, a top official at the
Hershey Trust Co., which manages the charity's finances, was charged by federal
prosecutors with pocketing $13,000 that was to be used for lobbying state
lawmakers as part of a sting.In addition, Chuck Ardo, the spokesman for the
Attorney General's Office, said that "we have not heard a satisfactory response
from" the Hershey Trust on other outstanding concerns.Before a 2013 agreement, there was no limit on
board compensation. The 2013 agreement limited compensation to a base pay of
$30,000 a year, but also includes more pay for attending meetings and heading
committees. The attorney general’s office expressed "serious concerns regarding the apparent
violations of the 2013 agreement."In its latest filing with the IRS for the year
ending July 31, 2014, the Hershey charity disclosed that Velma
Redmond, the current chairwoman earned $97,500 in
directors' compensation, Joseph Senser, the vice chairman earned $204,500, and long-standing
board member and a former chairman who joined in 2001, Robert Cavanaugh,earned $332,500.
The money could have come from multiple
Hershey-related boards and may not be subject to the 2013 agreement.The Hershey boards investigated the summer employment of
Cavanaugh's son with "one of the trust's investment management
firms."Mark Pacella, the chief deputy
attorney general, alleges the Hershey board's apparent "failure to
exercise its best efforts in a timely manner to secure new board members"
with experience in early childhood education and working with at-risk children.
Several board members resigned as a result of the investigation.The Attorney General's Office was seeking, by
July 31, the resignation of board members who have served more than 10 years.(philly.com)

Priest Took $300,00,000 Meant For Refugees

A former
high-ranking priest in the Roman Catholic Diocese of Manchester (NH) was
granted parole on a theft by unauthorized taking conviction but still must
serve a consecutive sentence in a case that involved the embezzlement of about
$300,000. The priest was ordered to repay $300,000 restitution to the diocese,
Catholic Medical Center and the estate of Msgr. John Molan.The thefts took place when he was involved with
a gay composer and recording artist on whom he lavished gifts including trips
to San Francisco and New York.He created fake invoices of $15,000 from a
Boston psychologist, submitting them to the diocese for reimbursement. He never
was a patient of the doctor's and was ordered to repay the man's legal bills
incurred as part of the criminal investigation.

He remains a priest
but is on administrative leave.

Another Vet Charity Raided

A former bookkeeper who siphoned nearly $800,000 from a Darien-based (CO)
and was sentenced to two years in prison and ordered to pay back the money,
which she stole over five years.

She worked for the National Veterans Services Fund and was accused of
writing checks to herself and to family members and then altering the
nonprofit's ledger to make it appear the money was given to veterans.
Investigators said that in 2013 alone, The bookkeeper wrote 135 bogus checks
totaling $185,000. Authorities said money stolen from the organization was used
to pay personal expenses for herself and her family, including car-loan
payments and vacations.

High Priced Nonprofit Care

Seven of the 10 most profitable U.S. hospitals each
cleared more than $160 million in 2013 from patient care services despite their
having nonprofit status, according to a new report.

Researchers from the Johns Hopkins Bloomberg School of
Public Health and Washington and Lee University drew on 2013 data from the
Centers for Medicare and Medicaid Services to analyze 3,000 acute care
hospitals, of which 59 percent were nonprofit, 25 percent were for-profit and
16 percent were public.

The study,published in the journal Health Affairs, led lead researcher Gerard
Anderson of Johns Hopkins to believe that the most profitable hospitals in the
country establish monopolies in their communities, allowing them to mark up
prices charged to private insurers.

When former Triangle Area Network (TAN) director Peggy
Lynn Gibson pleaded guilty to embezzling more than $200,000 from the nonprofit
in front of Jefferson County’s 252nd District Court Judge Raquel West many were
surprised that the charismatic and energetic executive would be morally capable
of such indiscretion. However, this isn’t the first time Gibson has absconded with
tens of thousands of dollars meant for the healthcare of those she was paid to
assist.

“It did not show up on any of the background checks,” TAN
board of directors president Jeff McManus said of eventually learning that
Gibson had embezzled from her last employer before finding a new victim in the
nonprofit TAN, staffed mostly by volunteers. “From what I know now, she was
barely out of that when she started with us.”

According to information obtained by The Examiner, Gibson
was charged with embezzling at least $108,000 from Texas Home Health in Hardin
County while she was employed by the healthcare provider in 2009. At the end of
2010, she agreed to pay back the money in exchange for the complainant
dismissing charges. By January 2012, it appears she still had yet to make good
on her end of the bargain as a Hardin County grand jury indicted Gibson on
second-degree theft charges for the 2009 embezzlement. A little more than a
year later, in July 2013, Hardin County prosecutors moved to dismiss the charges
because “the defendant has paid restitution in full.”

Where she got the money to pay off her $100,000-plus
bounty is open to speculation, but according to the Jefferson County indictment
that charges she went on to embezzle more than $363,000 from TAN, her crimes
against the Beaumont nonprofit.

An out-of-state criminal background check may have alerted
someone to at least some of Gibson’s prior bad acts, but they would have to
know some of her many other names – such as Peggy Coker, Peggy Redmond and
Peggy Doan.

It was under the name Peggy Doan that the admitted
embezzler was first convicted of theft. According to a criminal background
check, Gibson (Doan) pleaded guilty to two counts of theft and one count of
forgery in El Paso County, Colorado in 1996. She was given deferred
adjudication and a fine.

Gibson later went on to register a string of businesses –
some of which are still in operation, according to filings made with the state
of Texas. It is alleged that one way she was able to embezzle from past employers
was by opening up similarly named companies and depositing checks meant for the
legitimate firm.(source)

Charity Check Up:

Another Serial Fraudster: Hindu Temple Hit With Embezzlement

He led major
renovations of a Flint-area (MI) Hindu temple and embezzled more than $400,000
while he was its director, according to authorities. Investigations revealed
that the director was writing checks to himself and his businesses from the
temple's account. He said his investigation into temple finances only went back
six years due to the statute of limitations. He was the primary person in
charge of temple finances

The executive also has another case open in Genesee County Circuit Court, where last
year he pleaded no contest to two charges stemming from writing bad checks. A
no contest plea is not an admission of guilt, but is treated as such for the
purposes of sentencing. Sentencing in that case is pending a resolution in the
embezzlement and larceny case, court records show. (source)

A Thought or Two:

RAY DALIO at Bridgewater Associates shares some
thoughtful fundamental life principles that are certainly applicable to today’s
charitable environment. We will present one principle each newsletter. (principles)

1.A Michigan couple announced a $1 million donation
to Livestrong, the Austin-based cancer nonprofit — the biggest single donation
the group has received since 2010. Livestrong’s fundraising efforts had
suffered in recent years after revelation that its founder, Lance
Armstrong, used performance-enhancing drugs during his record seven consecutive
Tour de France wins. This year, the group’s high-profile CEO Chandini
Portteus resigned suddenly after less than a year at the helm of the
organization.

2.A trustee for Waco-based Life Partners
Holdings, a company that sells life insurance policies on behalf of the
terminally ill, has filed suit against more than two dozen local, state and
national nonprofit agencies seeking the return of $2.1 million in donations
made before the company filed for bankruptcy protection last year.
Organizations such as Fuzzy Friends Rescue, Rapoport Academy, Baylor Waco
Foundation, the Greater Waco Chamber of Commerce and 23 others have been named
in the filing in U.S. District Court in Fort Worth. Trustee H. Thomas Moran
asserts that longtime Life Partners CEO Brian Pardo made the donations from
funds he fraudulently received.

3.Former
Cleveland Browns receiver Reggie Rucker has pleaded guilty toembezzlingroughly $100,000 from various
nonprofit groups. Rucker now plans to cite his concussion history in
connection with the sentencing phase.

4.We got an email from Sen. Chuck Grassley’s office noting that the Senate Finance Committee is suggesting mandatory e-filing
by tax-exempt organizations for greater transparency. In general, only the largest and smallest
tax-exempt organizations are required to electronically file their annual
information returns. Tax-exempt corporations that have assets of $10 million or
more and that file at least 250 returns during a calendar year must
electronically file their Form 990 information returns. Private foundations and
charitable trusts, regardless of asset size, that file at least 250 returns
during a calendar year are required to file electronically their Form 990-PF
information returns. Organizations that file Form

Returns filed
electronically can be processed more rapidly and at much lower cost than paper
return filings. Therefore, the provision extends the requirement to
electronically file to all tax-exempt organizations required to file statements
or returns in the Form 990 series or Form 8872 (“Political Organization Report
of Contributions and Expenditures”). The provision also requires that the IRS
make the information provided on the forms available to the public in a
machine-readable format as soon as practicable. The goal is to increase
the transparency of, and enhance public access to information about, public
charities. (Grassley Press Release)

5.Seven of the nation’s 11 largest
donor-advised funds controlling more than $30 billion in assets don’t report
the pay of their highest executives, according to an analysis by The Chronicle.

Donor-advised funds belong to a special
category of charity that is growing fast. The funds are subject to federal
pay-disclosure laws like every other tax-exempt group in the United States.

Experts say the funds probably aren’t
doing anything illegal by not reporting executive pay, but many say they are
violating the intent of federal rules and laws intended to bring transparency
to the nonprofit world.

"This is not transparency. The
public should know what’s going on," says Dean Zerbe, a former aide to the
Senate Finance Committee, where he investigated charities.

Donor-advised funds collect money from individuals
who get an immediate tax deduction and then can channel that money to any
charity they want at any time.

The Schwab Charitable Fund and the
Vanguard Charitable Endowment Program (the second and third largest commercial donor-advised
funds in the country by revenue) reported paying their presidents $600,000 and
$314,000, respectively, in calendar year 2013, according to the organizations’
2014 Forms 990. Renaissance Charitable Foundation, which is affiliated with
Renaissance Administration LLC, a for-profit charitable-services provider in
Indianapolis, reported paying its leader $89,292 in 2014. The Ayco Charitable
Foundation reported paying John Mastriani, its president and a member of the
Board of Directors, $8,500 in 2015, during which time he reported working two
hours a week at the charity.

Representatives of the Morgan Stanley Global Impact
Funding Trust, U.S. Charitable Gift Trust, the Bank of America Charitable Gift
Fund, and the Raymond James Charitable Endowment Fund declined to comment or
did not respond to repeated requests for comment from The Chronicle. Mr. Zerbe, who left Capitol Hill to be
National Managing Director at Alliantgroup, which helps businesses find tax
credits and incentives, also is skeptical that volunteers lead the
donor-advised funds. "These things aren’t running on autopilot," he
told The Chronicle. Mr.
Zerbe, who helped craft the 2006 Pension Protection Act, which overhauled many
of the laws governing nonprofits, says executive pay should be reported even if
it isn’t necessarily legally required. If it isn’t listed on the 990, Mr. Zerbe
says, it should be posted on the nonprofit’s website. "Salaries and
compensation are a cornerstone of the 990," he says.

7.The executive director
of Healing Arts Initiative, who was attacked with drain cleaner last year, was
fired by the board of the charity, along with the financial officer who helped
her unearth what the authorities have called a $750,000 embezzlement scheme.

8.A former FBI special agent pleaded
guilty to stealing more than $136,000 that was seized during drug
investigations. Scott M. Bowman admitted in a Riverside, California, courtroom
to using the money for a three-week spending spree on things such as a car,
plastic surgery for his wife, and a Las Vegas boxing match, prosecutors
said.

9.Two former employees of
Bay Area Recycling for Charities are accused of funneling more than $25,000
intended for the nonprofit to another company.

We flagged these few
examples of charity misdeeds:

1.Visit Philadelphia
$200,000

2.Framingham United
Soccer Club (MA) $175,000

3.Keeler
Emergency Services Support Association (MI) <$4000

4.Skyline High School
Boosters’ Club (WA) $107,000

5.Western
Michigan Christian High School $208,000

6.Charlotte Catholic
High (NC) $300,000

7.You Are the Difference Foundation (CA)
$200,000

8.Foothill Farms Little
League (CA) $5000+

9.Triangle Area Network
(TX) $363,000

10.Hunger Free Vermont $165,000

11.Newark Street
School (VT) unknown

12.Ruidoso Board
of Realtors (NM) $200,000+

13.Palma Ceia United Methodist Church (FL) $147,000

14.Anne Moncure Elementary School (VA) unknown

15.Community Clothing Center (MI)
$1700

16.Pleasant Lake Elementary PTA (MI) $6100

17.ComServ Inc. (NC) $300,000

18.Detroit Metro Stars (MI) $21,4000

19.Vista Pop Warner Football and Cheer (CA) $100,000+

20.United Security and Police
Officers of America (NJ) $250,000

21.Dexter Community Schools (MI)
$100,000

22.St. John Lutheran Church (MI) $200,000

23.Northboro-Southboro School District (MA)$450,000

24.Stockton Junior Colts Hockey Club (CA) $27,000

25.Universalist Society Church (VT) $8000

Political/public official chicanery(just a few):

1.Federal authorities have indicted a New
York town supervisor and assistant town attorney, alleging fraud and deceit
connected to an affiliated nonprofit, the Ramapo Local Development Corporation.
They sold over $150 million of
municipal bonds on fabricated financials.

2.A former Hilo
supervisor for the state Department of Human Services faces charges she
embezzled more than $200,000 in public assistance, or welfare benefits, from
the office.

3.Former Summers County (WV) Commissioner
Jerry Berry was sentenced in Summers County Circuit Court Friday to at least
one year and no more than 10 in state prison for embezzling funds earmarked for
promoting tourism. Judge Robert Irons also ordered Berry to pay $41,699 in
restitution.

5.The former director of the Downtown Pasco
Development Authority (WA) who admitted to embezzling more than $90,000 from
the agency has been sentenced to one year in prison.

6.Federal authorities arrested Sauk Village's (IL) treasurer
for allegedly looting more than $21,000 from the village's police pension fund,
according to the U.S. Attorney's Office.

7.The former assistant
director of Montgomery County Social Services pleaded guilty to felony
embezzlement for using a department credit card to pay for $200,000 worth of
personal purchases.

8.Authorities have
arrested a Greenville County (SC) fire chief and accused him of taking $23,000
in public funds to purchase appliances and RV parts.

9.Former McAlester (OK)
Public Schools Superintendent and her husband are facing embezzlement charges
in Pittsburg County District Court. Her card charges were to a purchase a hotel
room at a resort casino and three meals while her husband accepted roughly
$5,100 in travel allowances during the 2015 calendar year — paid incrementally
each month — also while using a district-issued a fleet card to purchase gas.

10.Former Beaverton City (MI) Clerk was charged in
80th District Court after a police investigation revealed alleged
embezzlement of less than $100,000
police say she committed during her time as clerk.

12.Authorities say
a woman who oversaw finances for the former Show Low (AZ) Fire District embezzled nearly $1.8
million over several years. Her father, former Show Low Fire District Chief Ben
Owens Sr., also is accused of financial crimes.

13.A
67-year-old town clerk is accused of embezzling thousands of dollars from the
small town of Slick, Oklahoma.

Nonprofit
Imperativegathers
its information principally from media sources...some of which are directly
quoted. Virtually all cited are in some phase of criminal proceedings; some
have not been charged, however there is money missing. These incidents include
only a fraction of the estimated $40 billion of charity crimes. On rare
occasions, there may be duplicates.

Gary
Snyder is the author of Silence: The Impending Threat to the Charitable
Sector (Xlibris, June, 2011) and Nonprofits: On the Brink
(iUniverse, February, 2006) and articles in numerous publications. The book can
be bought at amazon.com,barnesandnoble.com, Barnes and Noble (store)

About Me

Gary Snyder is the author, most recently, of the groundbreaking expose on the charitable sector, Silence: The Impending Threat to the Charitable Sector as well as the often-cited guide on best practices and key concepts, Nonprofits: On
the Brink.

He is the publisher of a
twice-monthly newsletter, Nonprofit Imperative that gives an update on the current status of the
charitable sector.

Snyder is often quoted and frequent contributor to the blog of the National
Committee for Responsive Philanthropy. Snyder twiceauthored the Governance Chapter of the Michigan
Nonprofit Management Manual (4th and 5th editions).

He is a speaker on ethics,
financial and governance matters of the sector. For almost a decade, Snyder is frequently
consulted by Congress and has been quoted in print, broadcast and online media
outlets.